Opinion

The Real Estate Development Twilight Zone

By Dan Bertolet April 15, 2010



Back in 2007 it was perfectly reasonable to believe that before long the view looking west down Denny Way from Capitol Hill would look like this:





And likewise, the view from I-5 looking southwest across the REI building would look like this:





But then a certain bubble burst, and all of a sudden projects like the proposed dual 400-foot tower complex at 1200 Stewart Street rendered above seemed rather silly. In fact, back in 2007 there was something of a twin tower high-rise craze in Seattle, because that configuration turns out to be the most efficient way to max out the allowed building envelope for large parcels. Five such projects were proposed, including 1200 Stewart, but all were shelved.

Oddly enough, however, 1200 Stewart appears to be getting a second wind. The project was presented to the Design Review Board in February, and to the Design Commission last week. The developer told the Design Commission that there is a major investor interested in financing the project. Seriously?

Right now, a return to the sizzling real estate market of a few years ago is as hard for people to imagine as today's crash was during the boom. Has everything changed for good, or is this recession just another blip in the cycle? Clearly, those who would invest in 1200 Stewart think the latter. Because if you consider the project's non-ideal location, along with the struggling status of nearby competition, the project doesn't make a lot of sense without a bubble to support it.

During the boom, the Denny Triangle was hot (see illustration below). Remember the Trophy Building? The simple reason was that the Triangle had developable land available. But it's an awkward in-between location, and 1200 Stewart in particular has the handicap of being sandwiched between the car-choked arterials Denny Way and Stewart St, and is also adjacent to I-5 and a busy freeway entrance.


Denny Triangle diagram from the 1200 Stewart Design Review (click image for detailed pdf)


If 1200 Stewart moves forward, it wouldn't come on line until around 2013. Perhaps by that time there will be pent up demand for luxury condos and high-end hotel rooms. But currently, recently completed luxury projects like Olive8, Four Seasons, and Escala still have a lot of excess capacity to suck up. Too add to the improbability, 1200 Stewart is being developed by Lexas, the same folks who did Escala, where prices were recently slashed due to lack of sales.

Furthermore, there's also a proposed luxury condo/hotel project 2nd and Pike, which is a much more desirable location than 1200 Stewart St. And one might assume that even The 1, at the now filled in site at 2nd and Pine, would also be a more enticing investment.

In a previous Design Review meeting, the 1200 Stewart developers were asked to improve the building's pedestrian environment on the street. With the help of local architects Tiscareno Associates, the amount street-level retail was increased by more than 50 percent. The street-level view along Denny is rendered below (apparently they intend to polish the pavement on Denny).



It's quite the grand facade, and if it all makes you think of Escala, it's no coincidence—both buildings used the same design architect, San Diego-based Thoryk.

Welcome to the real estate development Twilight Zone. Here's what the area looks like today:

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